How Common Is a Market Correction?
With the S&P 500 seeing two corrections in 2018 (February and December), you might think that corrections are common. Or if you looked at the years 1991 to 1997, when there were no technical corrections, you might think they are infrequent. On average, corrections happen every 1.7 years – and last 112 days, according to Wes Moss, chief investment strategist at Capital Investment Advisors.
If it surprises you to hear that corrections only happen roughly every other year, you probably watch a lot of financial cable news. As prices slide, business reporters start talking about heading into “correction territory.” Indeed, since the Great Recession, the S&P 500 has had seven dips that were 5.8% to 9.9% off the index’s peaks, on top of six actual corrections. That’s 13 news cycles of hearing about corrections in the past 10 years, while there have been only 22 real corrections in the past 45 years (since 1974), according to Charles Schwab & Co.
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